Product differentiation and duopoly: when social welfare benefits from cross-shareholding
The present paper analyses the effects on social welfare of a partial crossparticipation at ownership level in a differentiated Cournot duopoly. We show that cross-participation, despite the fact it appears as an anti-competitive practice which reduces the degree of market competition, may increase social welfare when the products are complements between them, and, moreover, not only profit but also consumer’s welfare is enhanced. Therefore, the policy implication is that in industries characterised by product complementarity larger cross-participations at ownership level should be allowed, despite their anticompetitive nature.
|Date of creation:||11 Jan 2011|
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